Expenditure and confidence: using daily data to identify shocks to consumer confidence

The importance of consumer confidence in stimulating economic activity is a disputed issue in macroeconomics. Do changes in confidence represent autonomous fluctuations in optimism, independent of information on economic fundamentals, or are they a reflection of economic news? This article uses novel daily data to understand what can be learned about the dynamics of consumer confidence and spending. In contrast to the existing literature that uses data collected at lower frequencies, I find that the estimated relationship between daily consumer confidence and daily spending is weak. I interpret this finding as an indication that on a day-to-day basis, consumers are rationally inattentive and do not react to small and temporary fluctuations in consumer confidence.